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Perceptions of past inflation determine views of future inflation

The latest biannual results of the PPS/School for Economic and Business Sciences (SEBS) inflation survey among South African professionals show clearly that perceptions of past inflation determine views of future inflation. The survey showing these results was completed among members of PPS in September 2016.

"Repeated inflation surveys undertaken by PPS and SEBS, show that there is no doubt that inflation expectations are determined by the perception consumers have of price increases in the past," says Professor Jannie Rossouw, Head of SEBS. "The implication is simple," says Rossouw. "To contain inflation expectations, consumers must be convinced that historic inflation figures accurately reflect price increases. Convincing the public is a major challenge to be shared by the SA Reserve Bank who uses the inflation rate for policy purposes, and STATS SA, who calculates the inflation rate."

Rossouw, in association with the Professional Provident Society (PPS), have recently completed their eighth comprehensive South African inflation survey among PPS members.

Respondents were asked to respond to two questions:

Whether they believe that historic inflation reflected accurately the price increases in South Africa; and

To state their expectations of future inflation.

Eighty-six per cent of respondents indicated that they perceived actual price increases to be higher than the official rate of inflation (Figure 1). This concurs with the findings of the seventh survey conducted earlier this year, when 88 per cent of respondents reported a perception of price increases above the rate of inflation.

Figure 1

In response to the second question, respondents had to state their expectations of future inflation. As is shown below, 73 per cent of respondents expected higher inflation in the future (Figure 2). This is closely linked to the percentage of respondents perceiving inflation at levels higher than the official rate of inflation (Figure 1).

Figure 2

Respondents are fairly evenly split over age groups representing South Africa’s economically active population

(Figure 3). This shows that the inflation perceptions and expectations reported in the survey are prevalent over the full spectrum of South Africa’s population.

Figure 3

“PPS is excited about the continued collaborating with SEBS and with Wits,” says Gerhard Joubert, Executive: Group Marketing & Stakeholder Relations. “PPS includes the survey questions in its survey undertaken among South African professionals and will continue to do so in future. Collaboration between PPS and SEBS started in 2014. It has grown this year, with PPS sponsoring the first school principal management training capacity building workshop, hosted by SEBS for school principals in the Gauteng West Region on 27 and 28 June 2016.”

The survey is distributed electronically among PPS members and forms part of a broader survey on perceptions and impressions undertaken by PPS. The survey is completed electronically by PPS members and is therefore free from any enumerator bias of influence.

The latest survey questions were distributed to PPS members on 1 September 2016 and received 3 296 responses.